Bank customers continue to earn money on deposits, contrary to banks

7 January 2016

​Interest rates are low and remain in minus for Denmark’s banks, while bank customers are even experiencing a small plus.This is evident from this week’s new figures from the Central Bank of Denmark.

Around half of bank customers with deposits that can be withdrawn without notice receive positive interest rates, while the other half receives no interest.The interest on these accounts has in fact fallen from 0.4 pct. at the end of 2014 to 0.2 pct. in November 2015, but it remains in the black.

However, the picture is completely different for banks. Currently, the average interest rate on the banks’ money in the Central Bank of Denmark is approx. -0.5 pct. and at the beginning of January 2016, credit institutions already had approx. DKK 90 billion deposited at this rate of interest.

In DKK this corresponds to costing approx. DKK 400,000 per month for having DKK one billion deposited at the Central Bank of Denmark.

“The relationship between the interest that customers receive on their money in the bank and the interest that the banks actually receive at the Central Bank of Denmark has become more unfavourable for banks compared with a year ago,” says Chief Economist, Niels Storm Stenbæk, referring to the graph below, which clearly shows the bigger picture.

The figures show that large deposits are not particularly attractive for banks at the moment, as lending after the financial crisis is still at a relatively low level. In other words, banks have a lot of money that they want to lend to creditworthy customers.

Figure: Deposit interest rates for households and banks

Note: Deposit interest rates for banks are a weighted average of rates of interest on certificates of deposit and rates of interest on current-account deposits for all credit institutions. Deposit interest rates for households constitute interest on sight deposits excl. deposits related to loans such as mortgage loans. Households are defined as wage earners and pensioners etc. End of period figures (except for Jan 2016, which is made up of figures for the start of the period).

Source: Calculations by the Central Bank of Denmark and the Danish Bankers Association